Environmental Appraisal

Comprehensive model of strategic management

Strategic Intent
Vision Mission Business definition Business model Objectives

Strategy Formulation
Environmental Organisational Appraisal Appraisal SWOT Analysis Corporate-level Strategies Business-level Strategies Strategic analysis and choice Strategic plan

Strategy Implementation
Project Procedural Resource allocation Structural Behavioural Functional & Operational

Strategic Evaluation

Strategic control

Concept of environment in the context of strategic management Process of SWOT analysis Name, describe, and exemplify eight environmental sectors Process of environmental scanning Environmental Threats and Opportunities Profile (ETOP) for an organization

Concept of environment
The environment of any organisation is "the aggregate of all conditions, events and influences that surround and affect it."
K. Davis, The Challenge of Business, (New York, N.Y.: McGraw-Hill, 1975),p.43

Characteristics of environment
Environment is complex Environment is dynamic Environment has a far-reaching impact

Name

Last Price

Market Sales Net Profit Cap. Turnover (Rs. cr.)

Total Assets

84,583.2 19,333.3 HUL 391.40 2,305.97 2,633.92 9 0 Environment is complex 17,118. 3,287.6 1,354.5 Dabur India 96.60 471.43 43 7 1 Colgate 13,154.5 967.30 2,296.86 9 402.58

384.09

12,943.6 Godrej Consumer 400.00 2,442.64 1 Marico 152.00 9,345.72 2,353.71

434.96 1,806.18

315.33 1,425.61

Dabur made its largest acquisition by taking over Balsara hygiene and home products business. Dabur bought the entire promoters stake of three Balsara companies through an all-cash deal of Rs.140 crore. This was done to ensure Daburs presence in all price segments in the herbal oral care market.

Environment is dynamic

Environment has a farreaching impact

External environment

External environment
The external environment includes all the factors outside the organisation which provide opportunities or pose threats to the organisation.

Opportunity - favourable condition enables it to consolidate and strengthen its position. economic boom, favourable demographic shifts, arrival of new technologies, loosening of regulations, favourable global influences, and unfulfilled customer needs.. Threat is an unfavourable condition creates a risk for, or causes damage economic downturn, demographic shifts, new competitors, unexpected shifts in consumer tastes, demanding new regulations,

The Firms External Environment

Remote environment Industry environment Operating environment

Firms External Environment

Remote Environment
Economic Factors Social Factors Political Factors Technological Factors Ecological Factors

Economic Factors

Prime interest rates Inflation rates Trends in the growth of the gross national product Unemployment rates Globalization of the economy Outsourcing

Social Factors
Present in the external environment: Beliefs & Values Attitudes & Opinions Lifestyles Developed from: Cultural conditioning Ecological conditioning Demographic makeup Religion Education Ethnic conditioning.

Re-engineering the menu

Beliefs &

McDonaldsenteredIndia in1996. Values McDonaldshas continuallyadaptedto thecustomerstastes, valuesystems,lifestyle, languageandperception. GloballyMcDonaldswas knownforits hamburgers,beefand porkburgers. MostIndiansarebarred byreligionnotto consumebeeforpork.

Social scenario: The middle class explosion

Emerged as the consumption community of the country. Better education, higher aspirations. Consumption of non food items on the increase Concept of nuclear families. Higher disposable incomes. Demand for lifestyle products is on the rise.

Rural marketing scenario Huge, untapped market Shown impressive growth-television, mobile penetration. Becoming increasingly urbanized. Tapping these markets continues to bewilder most companies. Future growth lies in this market.

ProjectShaktiwaslaunchedinAndhraPradeshs Nalgondadistrictin2001, andithassweptthecountrywithsuchsuccess thatAnglo-DutchmultinationalfirmUnilever isnowcustomizingittoruralmarketsinSri Lanka,BangladeshandVietnam.I n15states,ithasworkedwithself-helpgroups and non-governmentalorganizationstoidentify underprivilegedwomenandtrainthemtobe saleswomen.

Political Factors

Fair-trade Decisions Tax Programs Minimum Wage Legislation Pollution and Pricing Policies Administrative jawboning

Technological Factors
Helps protect and improve the profitability of firms in growing industries. It alerts strategic managers to impending challenges and promising opportunities. The key to beneficial forecasting of technological advancement lies in accurately predicting future technological capabilities and their probable impacts.

Ecological Factors
Ecology refers to the relationships among human beings and other living things and the air, soil, and water that supports them. Threats to our life-supporting ecology caused principally by human activities in an industrial society are commonly referred to as pollution Loss of habitat and biodiversity Environmental legislation Eco-efficiency

Bhopal: the Union Carbide gas leak A poisonous gas cloud escaped from the Union Carbide India Limited (UCIL) pesticide factory Cloud contained 15 metric tons of methyl isocyanate (MIC), covering an area of more than 30 square miles. The gas leak killed at least 4.000 local residents instantly These health problems killed around 15.000 more victims in the years that followed. Approximately 100.000 people still suffer from chronic disease

Industry Environment
Harvard professor Michael E. Porter propelled the concept of industry environment into the foreground of strategic thought and business planning. The cornerstone of Porters work first appeared in the Harvard Business Review, in which he explains the five forces that shape competition in an industry. Porters well-defined analytic framework helps strategic managers to link remote factors to their effects on a firms operating environment.

Porter'sfive forcesanalysis

Forces Driving Industry Competition

Environment literally means the surroundings, external objects, influences or circumstances under which someone or something exists.
The environment of any organisation is the aggregate of all conditions, events and influences that surround and affect it.

The business environment of an organisation

GENERAL ENVIRONMENT

ORGANIZATION

RELEVANT ENVIRONMENT

DR S.M.GHOSH

3131

Eight sectors of the business environment

Economic International Market Political Regulatory Socio-cultural Supplier Technological

Environmental Scanning
The process by which organisations Monitor their relevant environment To identify opportunities and threats Affecting their business Known as Environmental Scanning

Environmental scanning can be defined as the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even a total market

Factors in environmental scanning

Events - important and specific occurrences taking place in different environmental sectors. Trends - the general tendencies or the courses of action along which events take place. Issues - the current concerns that arise in response to events and trends. Expectations - the demands made by interested groups in the light of their concern for issues.

Approaches to environmental scanning

Systematic approach Ad hoc approach Processed-form approach

Systematic approach
Under this approach, information for environmental scanning is collected systematically. Information related to markets and customers, changes in legislation and regulations that have a direct impact on an organisation's activities, government policy statements pertaining to the organisation's business and industry, etc. collected continuously to monitor changes take the relevant factors into account. Continuously updating such information is necessary not only for strategic management but also for operational activities.

Ad Hoc
Special survey & studies

Processed-form approach
For adopting this approach, the organisation uses information in a processed form available from different sources both inside and outside the organisation. When an organisation uses information supplied by government agencies or private institutions, it uses secondary sources of data and the information is available in a processed form.